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3 Semiconductor Stocks to Trade For Big-Time Gains

Stocks go up and stocks go down. But when it comes to the broad and volatile semiconductor sector, variability can even see both happen at the same time. Working to validate that track record are three popular semi stocks indicating investors should be ready to diversify long and short within this important group.

It generally remains a smart approach to follow or invest alongside the broader averages. Over longer time frames and during more meaningful market cycles, most listed companies go along, up or down, with the S&P 500 or other broad-based indices. That’s common knowledge. It’s also why trading with the trend is popular, particularly in rising stock markets like today.

In our estimation the current market environment is inviting investors to trade the market long. But as I’ve recently stressed here at InvestorPlace, trading selectively from the short side is making increasing sense.

Given this observation, as well as semi stocks’ reputation for mixing it up in bull and bear markets, the following analysis takes a dive into two names to buy and one company whose shares are set up for shorting.

It’s also true that within the market, semi stocks have a history of often testing bullish investors wherewithal. Even when the overall investing environment appears healthy, smaller business cycles, competition and near constant product innovation mean today’s hot semiconductor company can quickly become tomorrow’s bear, and vice versa.

Semi Stocks to Trade: Advanced Micro Devices (AMD)

Semi stock Advanced Micro Devices is our first company to trade. And this semiconductor is a buy. The past few years have taken a company on life support with small chance for recovery and transformed it into the S&P 500’s best performing stock. Shares have rocketed from around $2 in 2015 to a current market price near $55 that’s just removed from all-time-highs.

Bulls that rode shares higher can largely thank the smart leadership and execution of CEO Lisa Su. Over this period Advanced Micro Devices has successfully taken market share away from the likes of Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA) with a myriad of competitive products across sub-markets in the industry. AMD isn’t done either. Right now the price chart is indicating there’s more to come.

Technically, shares of AMD are forming a corrective three month long cup-shaped base within the stock’s larger uptrend. It’s bullish and looks more compelling as the price pattern has developed around the semi stock’s prior all-time-high from 2000. Along with stochastics ready to reinforce Advanced Micro Devices’ price tenacity upon signaling a bullish crossover and an earnings catalyst early next week, this semi stock is ready for upside action and new highs. I’m long, but smartly hedged and invite other investors to consider doing the same.

Micron Technology (MU)

The next name on our list of semi stocks to trade are shares of Micron Technology. Investors can consider MU stock the epitome of price volatility. The outfit’s memory markets have a history of erratic behavior on fast shifting supply and demand variables.

That characteristic has been tamed somewhat in our ever-connected world. Still, MU remains one the more visible movers-and-shakers within the semiconductor industry. And in today’s stock market, some nearby shaking to the downside is increasingly evident on the price chart.

Technically, Micron stock has gone from a promising corrective cup-shaped basing pattern that began nearly two years ago to confirming a double top formation.

The monthly view of this MU stock seen above illustrates our concern. With the cup failure also occurring on a bearish trade-thru of MU’s key 50% retracement level and stochastics pointing lower just out of overbought territory, the downside looks like unfinished business.

Xilinx (XLNX)

The final stock on our list of semi stocks to trade is programmable chip manufacturer Xilinx. This less-talked about large-cap just released mixed quarterly results and reduced guidance going forward.

That sounds less-than-inspirational. But companies have been known to sandbag. And given the novel coronavirus, my guess is Xilinx could be attempting to set investors up for future bullish surprises rather than more disappointment. The price chart agrees.

Technically, shares of XLNX have established a meaningful corrective low on the monthly chart. April’s rally has confirmed a bullish hammer candlestick which found long-term price support in-between the stock’s 50% – 62% retracement levels tied to the 2008 financial crisis. The situation appears bullish, but there’s more to Xilinx as well.

The monthly price action has also tested Xilinx’s lower Bollinger Band. That’s good news. What’s more, the volatile bottoming candle has successfully straddled a four-year long uptrend line after failing a shorter uptrend as shares corrected. Now, with earnings out of the way and stochastics successfully bottoming to support a low in shares, there’s even more reasons to see this as a semi stock to buy.

Disclosure: Investment accounts under Christopher Tyler’s management own positions in Advanced Micro Devices (AMD) and Micron (MU) shares and derivatives, but no other securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.